FAT CAT accountants are fleecing millions from defunct delivery firm City Link while drivers will be given just 1 per cent of their final pay packets.

Top City firm Ernst and Young has been tasked with winding up the company — but its still-running £3.5 million bill could now face a challenge from angry creditors.

An administrators’ progress report published yesterday claims that the vast majority of work hours claimed for — £2.2 million of the firm’s bills — were for staff at the rank of senior executive or above. 

Transport union RMT, which represents the City Link workers, says the wind-up of a parcels firm would normally involve handling hundreds of small-scale accounts.

“Given the relative simplicity of the solvency work and low value of the parcel transactions, it’s hard to understand why so much work carried out by Ernst and Young was performed by directors and senior executives rather than more junior staff with lower charge-out rates,” RMT general secretary Mick Cash told the Star.

Ernst and Young insisted that the sums were needed to pay appropriate staff to deal with the “large, complex and high-profile insolvency assignment.”

Tasks described in the report include selling off equipment, tracking down the owners of parcels, backing out of expensive contracts and surrendering leases on buildings.

City Link drivers found out they were losing their jobs on Christmas Day last year, in spite of investor Better Capital having issued a letter in September pledging to fund the firm for another year.

At a parliamentary hearing earlier this year, MPs suggested City Link had shifted staff into “bogus self-employment” — which meant they received no compensation when the firm went under.

Scores of workers received no payment at all for work in the final week — but payments to “secured creditors” such as Better Capital will take priority.

The firm has already been paid £5m of the £20m it hopes to recover.

Chief executive Jon Moulton was sunning himself in France when the Star contacted him for comment yesterday.

Both he and his firm are domiciled in the tax haven of Guernsey, despite their office address being  listed on their website as in Westminster.

The Ernst and Young dossier reports there is currently £21.7m in the bank account — out of which their own fees, payments to their contractors and payments to secured creditors must be paid.

Most shockingly, the report also reveals that the “unsecured creditors” are likely to receive just 1p in the pound of what they are owed.

“City Link workers, classified as self-employed, will lose 99 per cent of their unpaid earnings, and meanwhile Ernst and Young directors and senior execs have racked up £3.5 million in charges,” Mr Cash blasted.

The sheer paucity of payments to workers is due to the low probability of Better Capital clawing back the full £47.7m it put into the firm, the report admits. 

The only funds available to unsecured creditors under the law is a meagre “prescribed part” of a maximum of £600,000, “before the costs of dealing with the prescribed part.”

Ernst and Young were keen to point out that the fees they’ve charged wouldn’t affect workers’ payouts from the ring-fenced prescribed part.

Union sources indicated yesterday that payments to the accountancy giant could be challenged by workers who feel they have been robbed by the arrangement.